Securities regulators toughen governance disclosures in cannabis industry

Securities regulators in several provinces published guidance this month pushing stronger governance-related disclosures on the cannabis industry.

The guidance — from regulators in Ontario, British Columbia, Quebec, New Brunswick, Saskatchewan, Manitoba, and Nova Scotia — is aimed at governance-related disclosures, particularly in the context of mergers, acquisitions and other significant corporate transactions.

The move toward improving disclosures comes in light of the complications arising from potential conflicts of interest, said a Nov. 12 report by the Canadian Securities Administrators, an umbrella organization encompassing securities regulators from each province and territory.

Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers, said because conflicts of interest could have implications for M&A, investors need to understand the conflicts that could arise when issuers have crossover of financial interests.

“Strengthening governance disclosure is important to providing investors with information to make an informed decision,” said Morisset in a statement announcing the release of the CSA report.

With the growth of the cannabis industry, as well as the expansion of its market, cannabis issuers have been increasingly participating in the financing of their fellow issuers, noted the CSA. These circumstances have contributed to a growing trend overlapping of business relationships.

The CSA report also stressed that reporting issuers of all emerging industries, not just those dealing with cannabis, should likewise remain vigilant against the dangers of potential conflicts of interest.

The full text of the CSA’s guidance can be found in the “CSA Multilateral Staff Notice 51-359: Corporate Governance Related Disclosure Expectations for Reporting Issuers in the Cannabis Industry” which may be accessed via the individual websites of the participating jurisdictions, as linked below:

• Ontario Securities Commission
• British Columbia Securities Commission
• Autorité des marchés financiers (Quebec)
• Financial and Consumer Services Commission (New Brunswick)
• Financial and Consumer Affairs Authority of Saskatchewan
• The Manitoba Securities Commission
• Nova Scotia Securities Commission